The endless commutes, the meetings that leave you dead behind the eyes, the overtime you don’t get paid for. It’s all making you miserable and you really want to quit your job and start a business.
Maybe you already know what business you want to start. Or, you don’t but you are so burnt out that you just need some headspace away from the 9-5 grind to properly recover from stress and lack of sleep.
You know you need to quit your job to make it happen, but how? Do you just jump ship and hope for the best? Or should you have a financial cushion in place, just in case?
And should you really be leaving a secure job with regular pay packets and benefits to leap into the unknown? Uh oh, severe panic alert!
Insider tips on using an escape fund to quit your job and start a business
Before we talk about how to build an escape fund to give you a financial cushion to start your business or take a well-earned rest, let’s just talk about your ‘secure’ job for a moment.
Secure jobs are an illusion
Money paid into your bank each month, regular meetings and predictable weak teabags lead to you feeling like the only reason your job would ever change is if you decide to leave it.
So you call it a ‘secure job’. But this is not a true statement.
Jobs are actually very insecure as it all boils down to sales and profit. The business entity itself doesn’t care if you’re mortgaged up to your eyeballs or you have to pay for childcare.
If the business needs to cut costs, it’s money first and people second (well, last actually).
That secure employment you thought you would keep trudging to every week, could very quickly be whipped out from under you without a moments notice.
That’s why you shouldn’t be comparing a ‘stable job’ to an unstable ‘business’.
Yes, running a profitable business may take time to get going, but once it does, you will be in control of your own sales and profits, and not at the mercy of someone else’s.
So, onto our insider tips on building your escape fund to quit your job and start a business!
These first tips are from women that I interviewed for my ‘Real Women. Real Business’ series where I talked to female entrepreneurs who had quit their jobs and now run successful businesses.
The second part is about my tips for building an escape fund to quit your job and start a business, as this is exactly what I did before starting IWMLBproject!
How other successful businesswomen did it
One of the questions in my interview series was about whether they had any money saved up before they quit their jobs to start their business.
The original question and answers are below!
Did you have an ‘escape fund’ to tide you over while you set up your business or did you start it on the side while still at work?
When I set up my first business I had 3 months worth of money in the bank to pay my mortgage and overheads.
I was owed the equivalent of 4 months salary in back pay, which I knew I could eke out to at least 6 months. I also had some workshops and a script writing/directing job for a community group booked in, in advance.
I started my business while still at work, but I kept a fair bit of money on the side as a security blanket. I’m happy to say a blanket I never had to use. In my mind, this money was a backup and not to be used unless in a huge emergency.
I started saving money while I was working and also started helping other businesses in my spare time (for free) in order to gain experience in the start-up world and confidence in myself.
It sounds weird, but although I knew I was good at my job the idea of venturing out on my own and charge people for my time seemed scary. I wanted to prove to myself that if I could add value for free I could do it for a fee as well.
So, an interesting mix. Some of the businesswomen interviewed had 3-6 months worth of money saved. Others had money saved but also set up their business while still working.
All of them had some kind of financial cushion as a ‘just in case’ fall back plan.
This not the case for everyone of course. I personally think it reduces some of the ‘scariness’ of starting a business.
The worst case scenario is that you go back to work if your business fails. Rather than a worse case scenario of not being able to pay your mortgage!
If you feel inspired enough and just want to crack on with saving up your escape fund, you can sign up for my free 5-day email course below.
If you want to read my story and get some more tips on how to build your escape fund, read on!
My story and tips
In May 2017, left my corporate job (as a head of merchandise planning). IWMLBProject came, later on, so I hadn’t exactly decided what I wanted to do but I knew I wanted to do something else.
I was also incredibly burned out and desperately need to recover and regain my confidence.
I have always been pretty good with money and had been saving towards financial independence or FI (investing enough money to never have to work again) so my finances were in pretty good shape.
In order to reach FI, I would have had to work for another 5-8 years but I just couldn’t face that, so I decided to use some of my money as an ‘escape fund’.
I knuckled down over my final year at work to build a really good cash cushion in my current account and then left. You can read more about it in my blog post below.
Unfortunately, during the time I was trying to save as much as possible, I made myself pretty miserable as I made my budget so restrictive.
Having learned a few lessons since then, it’s about increasing your income as much as it is about saving.
So here are my tips for building your escape fund.
How to reduce your spending
If you are like most 30+-year-olds, you’ve been climbing the corporate ladder and getting the related pay rises over the last decade or so.
As your salary increased, you started to improve your lifestyle accordingly. More brunches out with friends, better quality clothing, a bigger house in an area with trendy coffee shops.
I’m not judging at all, I have also done this as it is very easy to do.
Now, I am not telling you to go back to living in a damp flat shared with 5 other people and eating Tesco value bread.
But if you really evaluated all areas of your life, some of your increased spendings make you happier, but some of them don’t. Cutting spending in these areas will increase your savings but won’t reduce your overall happiness.
Everyone is different, so only you know what will make a difference and what won’t.
The best (and only) way to do this is to track your spending for a good six months and categorise where your money goes.
You can either do this on an excel spreadsheet or use an app to help you do this. I personally use a spreadsheet as you are going through every single thing rather than have an app pull it all together for you.
Start with the biggest expenditures
Mortgage/rent, transport and food (which covers groceries and eating out) tend to be where most of our money goes each month.
If you can reduce these by 20%+ a month, you can start saving a good ole chunk of change.
In order to save that amount you could do the following:
- Move house. Okay, this is a massive pain in the ass. But, it could mean saving £££ or $$$ a month. This could be well worth it if it means you can quit your job sooner. Or you could reduce your mortgage interest rate if you can. Which means you save money without having to move – yippee!!
- Meal plan. Planning your weekly meals and only buying what you need (or using what you already have in the cupboards) is a great way to cut your food budget. If you need some help meal planning then you could use $5mealplan. They send you recipes and a grocery list each week which will help you cut down on spending. (Although you are paying for this service, their focus is on low-cost meals so you should more than save the $5 cost of the plan, you can always cancel it once you get the hang of it).
- Ditch the car. Depending on where you live, this may or may not be a possibility. The other options are to walk more or cycle. Or take fewer Ubers!
Once you have been through the biggest expenditures you can move onto the smaller ones and decide whether paying for them is more important than quitting your job and starting a business.
Keep going through everything until you have reduce your spending to a level you are happy with. That helps you save a good amount of money into your escape fund but that isn’t so low that it makes you unhappy.
If you want more help with tracking your spending you can read my blog post below.
How to boost your income
The flipside to reducing your savings is to increase your income. If you nail both of these you will get to your ‘quit work’ date so much quicker which is what you want, right?
If you work a very stressful job with long hours, I would be a bit careful with this one.
Make sure the income boosting stream you choose is going to have quick results and won’t suck precious time from your already full life.
That is why I DO NOT recommend starting a blog to boost your income quickly while you are still working.
I find it very annoying when this is touted as a ‘quick’ and ‘easy’ thing to do to earn money. It isn’t.
I love it but it is time-consuming and relies on the ‘snowball’ effect to earn money rather than instant returns.
Good ways to boost your income
Ebay your clutter
This is a great way to free up space and earn some money at the same time. Unless you are sitting on family heirlooms you probably aren’t going to earn thousands but every little helps.
I sold loads of old clothes and clutter on eBay and earned over £1k which I put towards my escape fund.
I’ll be honest, I find it pretty tedious doing the listings but it doesn’t take that long once you get going.
Ask for a raise
Check the payment bandings in your industry for the job you do (or ring up a couple of recruiters and ask). If your salary is below industry standard then you could put forward a business case for having a pay rise.
Start your business as a side-hustle
If you can start your business before you quit, by all means, do this. I tried to start a different business while working full-time and made my stress and sleep deprivation so much worse.
If you have the time to be able to do this, then do. If you are already burned out this may not be the best option while you are still working.
Rent a room or house on Airbnb
If you have a spare room or are going away on holiday, Airbnb could be a great option to earn some extra cash without taking up a lot of your time and energy.
It’s very easy to create a listing (I have rented out our house before on Airbnb while we went away).
You can use my referrer link if you want to sign up and then you can use your own referrer link to invite your friends too. IWMLBproject/Airbnb
If you have the time and it fits with your industry, consulting could be a very lucrative way to boost your savings. Either while still working or after you quit your job.
I’ve picked up a couple of short consultancy projects in the last year. Although I have my escape fund, it’s quite reassuring to work for a couple of months and top the savings back up again.
There are also companies that connect experts with businesses, usually on a phone call. I have been paid around £50 for an hour before to chat with a business about a certain niche within retail.
It’s not necessarily a regular thing but worth looking into if you are in a specialist field.
There are hundreds of ways to earn extra money, have a google, read some blog posts and then try a few!
How much do you need for an emergency fund?
Work out what you are comfortable with, I would say 12 months but it depends on your business model.
Some of the female entrepreneurs I interviewed had 3 months or 6 months saved. It really depends on what kind of business you are starting.
I’ve started a blog which takes a long time to monetise. Therefore I need a big escape fund (at least 12 months).
If you can start selling straight away then perhaps you need less.
If you need some help calculating how much you need to save for your emergency fund, you can use my 5-day email course that through exactly how to do this.
This post is creeping up to over 2500 words so I won’t include it in here. You can unsubscribe from the emails at any time so you could just complete the course and then leave me (*cries onto keyboard*).
This is what we go through in the email course just so you know what to expect.
- First day: Know how much you spend
- Second day: Understand and reduce fixed costs
- Third day: Understand and reduce variable costs
- Fourth Day: Work out how much you need for your escape fund
- Fifth Day: Calculate how long it will take you to save it
- *Bonus Day*: Get personalised help with building your escape fund – for free!
Here are some other related blog posts for quitting your job and starting a business that could help you!
- 44 free tools to start an online business with no money
- 7 myths about starting a business in your 30s
- 9 inspiring women who found success in their 30s
- What does starting a business really look like?
- 22 ways to simplify your life to make time for your business
- 18 glaring signs you are ready to quit your job
- How to come up with a business idea when you have no clue
- 10 reasons why you haven’t started your business yet
I personally believe you definitely need an escape fund if you want to quit your job and start a business.
It takes away some of the stress and allows you to focus on what is best for your customers rather than what will make the most money the quickest.
These are two very different things and will have a big impact on how you shape your business.
Take IWMLBproject for example.
I absolutely hate ads and sponsored blogs on posts, so have vowed not to do have them. If I was only focused on money, I may have given in and put some ads on the site.
Because I have an escape fund saved, I don’t need to compromise my values. I can work on creating products and services that will serve you better but will take longer to make money from.
Do you want to quit your job and start a business? Do you have an ‘escape fund’?